President Zeltmann asked Mr. Hiney to present a report on the progress of the
500 MW combined cycle power project. Mr. Hiney said that overall progress on
the project continues to be good. He reported that the total job and Slattery
Skanska, Inc. (“SSI”) completion percentages were approximately 92.5% and 91.5%,
respectively and that SSI was staying close to the early-finish curve and had
submitted 50 of 111 turnover packages, 46 of which have been accepted by General
Electric (“GE”), whose start-up team has increased to seven full-time
individuals. The first two contract milestones have been met and work continues
on the gas turbines to prepare for Milestone 3, which is on schedule for June
21. Chemical cleaning of the heat-recovery steam generators is under way in
support of Milestone 4, which is scheduled for August 10. The level of
cooperation remains good. In response to a question from Chairman Ciminelli,
Mr. Hiney said that design changes are minor and not more than expected and
Chairman Ciminelli stressed the need for accountability in terms of signing off
on SSI’s work before GE starts in order to avoid finger-pointing.

Next,
President Zeltmann asked Mr. Brady to report on the status of the Authority’s
bond rating from Moody’s Corp. Mr. Brady that the Authority’s AA2 rating had
been reaffirmed by Moody’s, although there had been some question as to whether
it would be because of concerns about the cost and schedule of the 500 MW
project. He said that he and the other Authority staff who are working with
Standard & Poor’s and Fitch on their ratings sense that those ratings will
remain favorable as well. In response to a question by Trustee Carey, Mr. Brady
stated that he expected a letter from Moody’s setting forth its analysis within
a week.

The President and Chief Executive Officer submitted the following report:

SUMMARY

“The Trustees are requested to approve two
allocations of available Expansion Power (‘EP’), totaling 850 kW, to two
industrial companies.

BACKGROUND

“Under Section 1005 (13) of the
Power Authority Act, the Authority may contract to allocate or reallocate
directly, or by sale for resale, 250 MW of firm hydroelectric power as EP to
businesses in the state located within 30 miles of the Niagara Power Project,
provided that the amount of power allocated to businesses in Chautauqua County
on January 1, 1987 shall continue to be allocated in such county.

DISCUSSION

“On October 22, 2003, the
Authority, NiMo, Empire State Development Corporation and the Buffalo Niagara
Enterprise signed a Memorandum of Understanding (“MOU”) that outlines the
process to coordinate marketing and allocating Authority hydro power. The
entities noted above have formed the Western New York Advisory Group (“Advisory
Group”) with the intent of better using the value of this resource to improve
the economy of Western New York and the State of New York. Nothing in the MOU
changes the legal requirements applicable to the allocation of hydro power.

“Based on the Advisory Group’s discussions,
staff recommends that the available power be allocated among two companies, as
set forth in Exhibit ‘4-A.’ The Exhibit shows, among other things, the amount
of power requested by each company, the recommended allocations and additional
employment and capital investment information. These projects will help to
maintain and diversify the industrial base of Western New York and will provide
new employment opportunities. They are projected to result in the creation of
64 jobs.

RECOMMENDATION

“The Director – Business Power
Allocations, Regulation and Billing recommends that the Trustees approve the
allocation of 850 kW of Expansion Power to the companies listed in Exhibit
‘4-A.’

“The Executive Vice President, Secretary
and General Counsel, the Senior Vice President – Marketing, Economic Development
and Supply Planning, the Vice President – Major Accounts – Marketing and
Economic Development and I concur in the recommendation.”

Mr.
Pasquale presented the highlights of staff’s recommendations to the Trustees.
Chairman Ciminelli said that the Delaco Steel allocation was also important to
retaining the Ford plant in Buffalo.

The following resolution, as
recommended by the President and Chief Executive Officer, was unanimously
adopted.

RESOLVED, That the allocation of 850 kW of Expansion Power,
as detailed in Exhibit “4-A,” be, and hereby is, approved on the terms set forth
in the foregoing report of the President and Chief Executive Officer; and be it
further

RESOLVED, That the Chairman, the President and Chief Executive Officer and all
other officers of the Authority are, and each of them hereby is, authorized on
behalf of the Authority to do any and all things and take any and all actions
and execute and deliver any and all agreements, certificates and other documents
to effectuate the foregoing resolution, subject to the approval of the form
thereof by the Executive Vice President, Secretary and General Counsel.

The President and Chief Executive Officer submitted the following report:

SUMMARY

“The Trustees are requested to approve extended
benefits for 39 Power for Jobs (‘PFJ’) customers as listed in Exhibits ‘5-A’ and
‘5-B.’ These customers have been recommended to receive such extended benefits
by the Economic Development Power Allocation Board (‘EDPAB’).

BACKGROUND

“In July 1997, the New York State Legislature and
Governor George E. Pataki approved a program to provide low-cost power to
businesses and not-for-profit corporations that agree to retain or create jobs
in New York State. In return for commitments to create or retain jobs,
successful applicants receive three-year contracts for PFJ electricity.

“The PFJ program originally made 400 megawatts
(‘MW’) of power available. The program was to be phased in over three years,
with approximately 133 MW made available each year. In July 1998, as a result
of the initial success of the program, the Legislature and Governor Pataki
amended the PFJ statute to accelerate the distribution of the power, making a
total of 267 MW available in Year One. The 1998 amendments also increased the
size of the program to 450 MW, with 50 MW to become available in Year Three.

“In May 2000, legislation was enacted that
authorized another 300 MW of power to be allocated under the PFJ program. The
additional MW were described in the statute as ‘phase four’ of the program.
Customers that received allocations in Year One were authorized to apply for
reallocations; more than 95% reapplied. The balance of the power was awarded to
new applicants.

“In July 2002, legislation was signed into law by
Governor Pataki that authorized another 183 MW of power to be allocated under
the program. The additional MW were described in the statute as ‘phase five’
of the program. Customers that received allocations in Year Two or Year Three
were given priority to reapply for the program. Any remaining power was made
available to new applicants. The program’s sunset date is December 31, 2005.

“In 2004, provisions of the approved state budget
extended the benefits for PFJ customers whose contracts expire before the end of
the program in 2005. Such customers may choose to receive an ‘electricity
savings reimbursement’ rebate and/or a power contract extension. The Authority
was also authorized to voluntarily fund the rebates, if deemed feasible and
advisable by the Trustees.

“PFJ customers whose contracts expired on or prior
to November 30, 2004 are eligible for a rebate to the extent funded by the
Authority from the date their contract expired through December 31, 2005. As an
alternative, such customers may choose to receive a rebate to the extent funded
by the Authority from the date their contract expired as a bridge to a new
contract extension, with the contract extension commencing December 1, 2004.
The new contract would be in effect from a period no earlier than December 1,
2004 through the end of the PFJ program on December 31, 2005.

“PFJ customers whose contracts expired after
November 30, 2004 are eligible for rebate or contract extension, assuming
funding by the Authority, from the date their contracts expire through December
31, 2005.

“Approved contract extensions entitle customers to
receive the power from the Authority pursuant to a sale-for-resale agreement
with the customer’s local utility. Separate allocation contracts between
customers and the Authority contain job commitments enforceable by the
Authority.

DISCUSSION

“As a result of its meeting,
EDPAB recommended that the Authority’s Trustees approve electricity savings
reimbursement rebates to the 39 businesses listed in Exhibit ‘5-A.’
Collectively, these organizations have agreed to retain more than 15,000 jobs in
New York State in exchange for the rebate. The rebate program will be in effect
until December 31, 2005, the program’s sunset.

“The Trustees are requested to approve the
payment and funding of rebates for the companies listed on Exhibit ‘5-A’ in a
total amount currently not expected to exceed $2,500,000. Staff recommends that
the Trustees authorize a withdrawal of monies from the Operating Fund for the
payment of such amount, provided that such amount is not needed at the time of
withdrawal for any of the purposes specified in Section 503(1)(a)-(c) of the
General Resolution Authorizing Revenue Obligations, as amended and
supplemented. Staff expects to present the Trustees with requests for
additional funding for rebates for the companies listed on the Exhibit in the
future. The Treasurer has determined that such amount is not needed for any of
the purposes specified in Section 503(1)(a)-(c) of the General Resolution
Authorizing Revenue Obligations, as amended and supplemented.

“Completed applications were
reviewed by EDPAB and recommendations were made at their meeting on May 24,
2005.

FISCAL INFORMATION

“Funding of rebates for the
companies listed in Exhibit ‘5-A’ is not expected to exceed $2,500,000. Payments
will be from the Operating Fund.

RECOMMENDATION

“The Senior Vice President and
Chief Financial Officer and the Director – Business Power Allocations,
Regulation and Billing recommend that the Trustees approve the payment of
electricity savings reimbursements to the PFJ customers listed in Exhibit ‘5-A.’

“The Executive Vice President, Secretary
and General Counsel, the Senior Vice President – Marketing, Economic Development
and Supply Planning, the Vice President – Major Account Marketing and Economic
Development , the Senior Vice President, Public and Governmental Affairs and I
concur in the recommendation.”

The following resolution, as
recommended by the President and Chief Executive Officer, was unanimously
adopted.

WHEREAS, the Economic Development Power Allocation Board has recommended that
the Authority approve electricity savings reimbursements to the Power for Jobs
customers listed in Exhibit “5-A.”

NOW THEREFORE BE IT RESOLVED, That to implement such Economic Development
Power Allocation Board recommendations, the Authority hereby approves the
payment of electricity savings reimbursements to the companies listed in Exhibit
“5-A,” as submitted to this meeting, and that the Authority finds that such
payments for electricity savings reimbursements are in all respects reasonable,
consistent with the requirements of the Power for Jobs program and in the public
interest; and be it further

RESOLVED, That based on staff’s recommendation, it is hereby authorized that
payments be made for electricity savings reimbursements as described in the
foregoing report of the President and Chief Executive Officer in the aggregate
amount of up to $2,500,000 and it is hereby found that amounts may properly be
withdrawn from the Operating Fund to fund such payments; and be it further

RESOLVED, That such monies may be withdrawn pursuant to the
foregoing resolution upon the certification on the date of such withdrawal by
the Vice President – Finance or the Treasurer that the amount to be withdrawn is
not then needed for any of the purposes specified in Section 503 (1)(a)-(c) of
the General Resolution Authorizing Revenue Obligations, as amended and
supplemented; and be it further

RESOLVED, That the Senior Vice President – Marketing, Economic Development
and Supply Planning or her designee be, and hereby is, authorized to negotiate
and execute any and all documents necessary or desirable to effectuate the
foregoing subject to the approval of the form thereof by the Executive Vice
President, Secretary and General Counsel; and be it further

RESOLVED, That the Chairman, the President and Chief Executive Officer and all
other officers of the Authority are, and each of them hereby is, authorized on
behalf of the Authority to do any and all things and take any and all actions
and execute and deliver any and all certificates, agreements and other documents
to effectuate the foregoing resolutions, subject to the approval of the form
thereof by the Executive Vice President, Secretary and General Counsel.

The President and Chief Executive Officer
submitted the following report:

SUMMARY

“The Trustees are requested to
approve an allocation of power under the Municipal and Rural Cooperative
Economic Development Program (‘Program’) to the Village of Green Island
(‘Village’).

BACKGROUND

“The 1991 amendment to the power
sales agreement between the Authority and the Municipal and Rural Cooperative
Systems reserved 108,000 kW of power for economic development in the systems.
As of April 27, 2004, 32,950 kW had been allocated.

“Power from this block can be
allocated to individual systems to meet the increased electric load resulting
from eligible new or expanding businesses in their service area. Under the
guidelines established for the Program, an allocation to a system should meet a
target number of new jobs per megawatt (‘MW’). The guidelines provide that for
businesses new to a system, the jobs-per-MW ratio is considered on a
case-by-case basis. For projects involving existing businesses, the number of
jobs per MW is the number of new jobs compared to the level of employment prior
to the expansion. Specifically, for companies employing 100 or less, the target
ratio is 25 jobs per MW; for companies employing 101-250, the ratio is 50; for
companies employing 251-500, the ratio is 75; and for companies employing more
than 500, the ratio is 100 jobs per MW.

“The Village has submitted an
application for power under the Program for consideration by the Trustees.

DISCUSSION

“An application has been
submitted by the Village on behalf of Crystal IS, Inc. (‘Crystal’), a privately
held corporation. Crystal develops and manufactures single-crystal aluminum
nitride (‘AIN’) substrates, which are considered critically important for next-
generation high-performance electronic and optoelectronic III-semiconductor
devices. Crystal’s product is sold in the U.S. and exported to Japan. Crystal
is considered the leading supplier of AIN substrates in the market.

“Crystal proposes to relocate its
entire Watervliet NY development and manufacturing operations to the Village by
September 1, 2005. The company will be moving to a currently vacant portion of
an existing building remodeled to its specifications. Total investment related
to the move is estimated to be $1.1 million. The relocation is required to
expand manufacturing capacity and accelerate process development in order to
handle increased demands for AIN substrates. Crystal selected the Village
because of its preferred land, workforce availability, and availability of
low-cost electrical power. The new facility will provide for approximately 57
new jobs over the next three years, adding revenue to the state and local
economy. The estimated electrical load for the facility is approximately 300
kW. Authority staff recommends that the Trustees approve an allocation of 300
kW to the Village on behalf of Crystal.

“Under the Program, the
recommended allocation consists of half hydropower and half incremental power.
In accordance with the Authority’s marketing arrangement with the municipal and
cooperative customers, the hydropower will be added to the recipient system’s
contract demand at the time the project becomes operational. The hydropower
earmarked for this Program is presently sold to the municipal and cooperative
customers on a withdrawable basis. As a partial-requirements customer, the
Village may purchase the incremental power from the Authority or an alternate
supplier.

RECOMMENDATION

“The Director – Business Power
Allocations, Regulation and Compliance recommends that the Trustees approve the
allocation of power under the Municipal and Rural Cooperative Economic
Development Program to the Village of Green Island in accordance with the above
discussion.

“The Executive Vice President,
Secretary and General Counsel, the Senior Vice President - Marketing, Economic
Development and Supply Planning and I concur in the recommendation.”

The following resolution, as
recommended by the President and Chief Executive Officer, was unanimously
adopted.

RESOLVED, That the allocation of power to the Village of
Green Island under the Municipal and Rural Cooperative Economic Development
Program are hereby approved as set forth in the foregoing report of the
President and Chief Executive Officer; and be it further

RESOLVED, That the Senior Vice President – Marketing,
Economic Development and Supply Planning or her designee be, and she hereby is,
authorized to execute any and all documents necessary to effectuate such
allocation, subject to the approval of the form thereof by the Executive Vice
President, Secretary and General Counsel; and be it further

RESOLVED, That the Chairman, the President and Chief Executive Officer and
all other officers of the Authority are, and each of them hereby is, authorized
on behalf of the Authority to do any and all things and take any and all actions
and execute and deliver any and all certificates, agreements, and other
documents to effectuate the foregoing resolution, subject to the approval of the
form thereof by the Executive Vice President, Secretary and General Counsel.

The President and Chief Executive Officer
submitted the following report:

SUMMARY

“The
Trustees are requested to authorize payments totaling up to $8 million from the
Operating Fund for expenditures of the New York State Office of Parks,
Recreation and Historic Preservation (‘OPRHP’) in New York State fiscal year (‘SFY’)
2005-06. The funds are to be used for operation and maintenance of Robert Moses
State Park (‘Robert Moses’), Coles Creek State Park (‘Coles Creek’), Art Park
and Niagara Reservation (including Reservoir, Whirlpool, DeVeaux Woods and
Devil’s Hole State Parks and the Niagara Gorge Trails) (‘Niagara Reservation’).
Robert Moses and Coles Creek are directly associated with the St. Lawrence/FDR
Power Project and have been incorporated into the Federal Energy Regulatory
Commission (‘FERC’) project license issued in October 2003. Art Park and
Niagara Reservation, although not part of the FERC-licensed project, are
associated with the Niagara Power Project.

“The
Trustees are further requested to authorize the President and Chief Executive
Officer, or his designee, to sign any documents or enter into any agreements
necessary to effectuate such payment, subject to approval as to the form thereof
by the Executive Vice President, Secretary and General Counsel.

BACKGROUND

“During
negotiations leading up to the introduction of the SFY 2003-04 Executive Budget,
the Authority staff agreed to present to the Trustees for their approval a
proposal to have the Authority assume of responsibility for operations expenses
at four New York State parks, including Art Park, Robert Moses, Coles Creek and
Niagara Reservation, in an amount not to exceed $8 million. Staff contemplated
at that time that this level of funding would be a recurring expense to be
presented to the Trustees for approval through fiscal year 2007-08.

“The
approved New York State Budget for SFY 2003-04 adopted the Governor’s
recommendations. At their meeting of June 24, 2003, the Trustees were advised
that while authorization was requested only for SFY 2003-04, it was expected
that such payments would continue through the end of the current federal license
for the Niagara Power Project in 2007. The Trustees authorized payments of up to
$8 million to the OPRHP Patron Services Account for SFY 2003-04, and payments
were subsequently made in conformance with such authorization. At their meeting
of September 28, 2004, the Trustees authorized payments of up to $8 million to
the OPRHP Patron Services Account for SFY 2004-05, and payments were
subsequently made in conformance with such authorization.

“The
2005-06 Executive Budget includes a special Revenue-Patrons Fund Account
appropriation of $64.425 million, which contemplates an $8 million contribution
from the Authority for operations expenses at Art Park, Robert Moses, Coles
Creek and Niagara Reservation.

DISCUSSION

“Payments
made by the Authority would be used for OPRHP operating costs to include, but
not be limited to, personal services, fringe benefits and non-personal services
costs directly related to the operation of Art Park, Robert Moses, Coles Creek
and Niagara Reservation.

“Payments
would be made to the OPRHP Patron Services Account in three installments. An
initial payment of $4 million for the first and second quarters of SFY 2005-06
would be made immediately upon the Trustees’ approval and a finding by the
Senior Vice President and Chief Financial Officer, the Vice President – Finance
or the Treasurer that such amount is not needed for any of the purposes set
forth in Section 503(1) (a)-(c) of the Authority’s General Resolution
Authorizing Revenue Obligations, as amended and supplemented. Subsequent
payments of $2 million each would be made at the beginning of the third and
fourth quarters of the SFY conditioned upon the Section 503(1) certification
discussed above. All such payments would be subject to reconciliation based on
OPRHP’s actual O&M expenditures for such parks. The Treasurer has determined
that such amount is not needed for any of the purposes set forth in Section
503(1) (a)-(c) of the Authority’s General Resolution Authorizing Revenue
Obligations, as amended and supplemented.

“Payments
would be made pursuant to an annual spending plan approved by the New York State
Division of the Budget and a quarterly reconciliation report documenting all
costs to be provided by OPHRP to the Authority within 45 days of the end of the
third and fourth quarters (November 15 and February 15).

FISCAL INFORMATION

“Payments
pursuant to this authorization will be made from the Authority’s Operating Fund.

RECOMMENDATION

“The Senior
Vice President – Public and Governmental Affairs and the Vice President –
Governmental Affairs and Policy Development recommend that the Trustees approve
operating fund expenditures of up to $8 million for payment to the New York
State Office of Parks, Recreation and Historic Preservation Patron Services
Account for the operation and maintenance of Art Park, Robert Moses State Park,
Coles Creek State Park and the Niagara Reservation (including Reservoir,
Whirlpool, DeVeaux Woods and Devil’s Hole State Parks and the Niagara Gorge
Trails) in New York State fiscal year 2005-06.

“The
Executive Vice President – Power Generation, the Executive Vice President,
Secretary and General Counsel and I concur in the recommendation.”

The
following resolution, as recommended by the President and Chief Executive
Officer, was unanimously adopted.

RESOLVED, That Operating Fund expenditures of up to $8 million be made to the
Special Revenue-Other Account (New York State Office of Parks, Recreation and
Historic Preservation Patron Services Account) for the operation and maintenance
of Art Park, Robert Moses State Park, Coles Creek State Park and the Niagara
Reservation (including Reservoir, Whirlpool, DeVeaux Woods and Devil’s Hole
State Parks and the Niagara Gorge Trails), as recommended in the foregoing
report of the President and Chief Executive Officer; and be it further

RESOLVED, That such amounts shall be paid from the Operating Fund upon a
certification by the Senior Vice President and Chief Financial Officer, the Vice
President – Finance or the Treasurer that such amounts are not needed for any of
the purposes set forth in Section 503(1) (a)-(c) of the Authority’s General
Resolution Authorizing Revenue Obligations, as amended and supplemented; and be
it further

RESOLVED, That the President and Chief Executive Officer, or his designee, be
and hereby is, authorized to sign any documents or enter into any agreements
necessary to effectuate such payment, subject to approval as to the form thereof
by the Executive Vice President, Secretary and General Counsel; and be it
further

RESOLVED, That the Chairman, the President and Chief Executive Officer and
all other officers of the Authority are, and each of them hereby is, authorized
on behalf of the Authority to do any and all things and take any and all actions
and execute and deliver any and all agreements, certificates and other documents
to effectuate the foregoing resolution subject to the approvalof the
form thereof by the Executive Vice President, Secretary and General Counsel.

The President and Chief Executive Officer
submitted the following report:

SUMMARY

“The Trustees are requested to
authorize the Vice President – Energy Resource Management, with the concurrence
of the Executive Vice President – Power Generation and the Vice President –
Chief Risk Officer, to approve the execution of fuel-price and energy-price
financial hedging contracts and fuel-supply contracts (collectively, the
‘Hedging Contracts’) to satisfy the Authority’s hedging strategy obligations
under the recently executed long-term agreements with the Authority’s four major
southeastern New York Governmental customers (‘Governmental Customers’),
provided that aggregate nominal value of all Hedging Contracts shall not exceed
$195 million. The authority sought herein shall be limited to the Governmental
Customers’ 2006 rate year only.

BACKGROUND

“At their meeting of February 9,
2005, the Trustees approved execution of new long-term contracts (‘Long-Term
Contracts’) between the Authority and the Governmental Customers. The Long-Term
Contracts provide for a collaborative approach by which decisions relating to
acquiring fuel and energy to satisfy the Governmental Customers’ load
requirements are developed jointly, and with Governmental Customers’
concurrence, Hedging Contracts are executed by the Authority. The Long-Term
Contracts thus establish a collaborative process by which decisions are made, a
sharing of market risk occurs, and, in some cases, a complete pass through of
market risk to the Governmental Customers occurs. In addition, in the case of
energy supply contracts developed through this collaboration process, the
Governmental Customers will pay exit fees if they terminate the Long-Term
Contracts.

“One factor to be considered in
assessing this request for approval authority is the scope of electric energy
and fuel purchasing activities by the Energy Resource Management group (‘ERM’).
The fuel expense for the Authority continues to increase due to increasing
prices and increasing fuel requirements. For 2004, the fuel expense was $259
million. For 2005, the budget is estimated to be $347 million. The 2006 budget
is estimated to be $430 million. Although higher per-unit fuel costs contribute
to this increase, the increase in the 2006 budget is predominately related to
the increase in overall fuel requirements due to the commencement of operation
of the new 500 MW Combined Cycle Plant. Another very pertinent factor to be
considered is the level of purchase power expense that the Authority has
routinely expended in support of the Governmental Customers. In 2004 the
purchase power expense for Governmental Customers was $174.4 million.

DISCUSSION

“Within the time frame agreed
upon between the Authority and the Governmental Customers, the Governmental
Customers will choose one of four hedging strategies (the ‘Hedging Plan’)
previously submitted to them by the Authority and upon which analysis has been
developed by the Authority. Three of the four strategies are developed based
upon criteria selected by the Governmental Customers, with assistance from the
Authority (collaborative process), and the fourth (default option) is based upon
criteria selected solely by the Authority. The Governmental Customers are
required to make a selection from the three strategies submitted. If the
Governmental Customers are unable to reach agreement, the Authority’s default
option will be implemented. Once the Hedging Plan has been chosen, the
Authority is obligated to immediately obtain market prices for the components of
the Hedging Plan. If such prices are within a 5% tolerance of the prices of
such components as previously submitted to the Governmental Customers for
review, the Authority is authorized to proceed with execution of the Hedging
Contracts.

“However, the dollar value of the
Hedging Contracts, if acquired or executed as a single transaction, will likely
exceed the maximum authority granted to Authority officers by the Trustees in
their January 25, 2005 Resolution. Due to the possible rapid movements of fuel
and energy prices within the energy and fuel markets, it is important that the
Authority have the flexibility to immediately proceed with the execution of the
Hedging Contracts. Given the possible large size of contemplated transactions,
time delays in execution could be very costly. Consequently, it is recommended
that approval authority be granted to the Vice President - Energy Resource
Management, with such approval authority being exercised in each instance only
with the concurrence of both the Executive Vice President – Power Generation and
the Vice President - Chief Risk Officer. In the event that either the Executive
Vice President – Power Generation or Vice President – Chief Risk Officer is
unavailable, the Senior Vice President – Chief Financial Officer would provide
the required concurrence.

“Pursuant to this requested
authority, the Vice President – Energy Resource Management would have the
authority to approve Hedging Contracts that: (i) exceed the fuel and electric
per- transaction limits for financial hedge transactions, and (ii) the spot
trade limits for physical transactions, established in Appendices A and B of the
January 25, 2005 Resolution, provided that, in addition to any other cumulative
or per-day limits in Appendices A and B, such Hedging Contracts not exceed $195
million in cumulative nominal value. This approval authority would be limited
solely to the Hedging Contracts required to meet the selected hedging plan for
the Governmental Customers’ 2006 rate year and shall supersede the
per-transaction and spot-trade limits for entry into financial hedging
contracts and fuel purchase contracts established by the January 25, 2005
Trustee resolution Thus, the maximum dollar value on an individual transaction
limit, established by the January 25, 2005 Trustee resolution, shall be
suspended but, again, only as it relates to acquisition and execution of
positions required by the Hedging Plan, for the 2006 rate year, selected by the
Governmental Customers. Depending upon the Hedge Plan ultimately selected by
the Governmental Customers for the 2006 rate year, it may be necessary, in the
future, to increase the cumulative nominal value limit for NYMEX contracts of
$90 million.

“For the purpose of satisfying
the hedging strategy plan requirements of the Long-Term Contracts, it is not
contemplated that physical fuel supply contracts, as opposed to financial hedge
contracts or NYMEX contracts, would normally be used. However, if a physical
fuel supply contract is more effective in achieving the Hedging Plan, physical
fuel supply contracts may also be entered into as Hedging Contracts.

“In assessing the financial
obligations of the Authority created by the proposed authorization, it should be
noted that, in the case of the most typical financial Hedging Contracts which
may be used (swaps and NYMEX contracts), the financial obligations would be
measured by the difference between the fixed price the Authority would pay and
the floating price to be paid by the counterparty. If the market price rises
above the fixed price, payments would be made to the Authority based on the
difference. If the market price falls below the fixed price, the Authority
would make payments based on the difference. It is these differences that
determine the financial obligations.

“However, these Hedging Contract
payments would serve to hedge actual purchases of energy or fuel in the future,
and the net result of these Hedging Contacts would be to allow the Authority to
fix the price paid for energy or fuel. For example, if the Authority entered
into an energy swap where it paid $40 per MWH and the counterparty paid the
market price, and the price fell to $30 per MWH, the Authority would have to pay
$10 per unit to the counterparty. However, at the same time, the Authority would
be buying energy in the market at the price of $30 per MWH. If one adds the $10
per MWH payment made to the counterparty to the $30 per MWH price paid by the
Authority for the physical purchase of energy, the effective price paid for the
energy is $40 per MWH, thereby fixing the Authority’s price. A similar result
would be obtained if market prices are above the Authority’s fixed price and the
Authority is then paid an amount by the counterparty. That payment would then
be used by the Authority to offset physical purchases in the market at the
higher price.

“While the cumulative authority
sought (nominal value not to exceed $195 million) represents a significant
commitment, these expenses do not give rise to exposure to the Authority as the
commitment and ultimately the actual purchase of the hedging components,
depending on the hedge strategy selected by the Governmental Customers, are
required and are in accordance with the terms of the Long-Term Contracts. All
of the costs to the Authority associated with the Hedging Contracts will be
recovered from the Governmental Customers through the 2006 rates.

“Upon final completion of the
execution of all transactions comprising the elements of the Hedging Plan
selected by the Governmental Customers, the Vice President – Energy Resource
Management will report the results to the Trustees.

FISCAL INFORMATION

“All of the costs to the Authority
associated with the Hedging Contracts will be recovered from the Governmental
Customers through the 2006 rates.

RECOMMENDATION

“The Vice President – Chief Risk
Officer recommends that the Trustees authorize the Vice President – Energy
Resource Management, with the concurrence of the Executive Vice President –
Power Generation and the Vice President – Chief Risk Officer or in either of
their absences, the Senior Vice President and Chief Financial Officer, to
approve the execution of Hedging Contracts to satisfy the Authority’s hedging
strategy obligations under the Long-Term Contracts, within the limits specified
above.

“The Executive Vice President –
Power Generation, the Executive Vice President, Secretary and General Counsel,
the Senior Vice President and Chief Financial Officer and I concur in the
recommendation.”

Mr.
Warmath presented the highlights of staff’s recommendations to the Trustees. In
response to questions from Vice Chairman McCullough, Mr. Warmath explained that
all costs incurred by the Authority would be recovered through the rates paid by
the SENY customers.

The following resolution, as
recommended by the President and Chief Executive Officer, was unanimously
adopted.

RESOLVED, That the Vice President – Energy Resource Management, with the
concurrence of the Executive Vice President – Power Generation and the Vice
President – Chief Risk Officer (or in either of their absences, the Senior Vice
President and Chief Financial Officer), is hereby authorized to approve and
enter into, on behalf of the Authority, in connection with the Authority’s
obligations under the Long-Term Contracts, as described in the foregoing report
of the President and Chief Executive Officer:

2.fuel-related transactions, including, but not limited to the physical
purchase of natural gas and oil;

3.in addition to the authority granted under the April 27, 2004 Resolution
adopted by the Trustees relating to NYMEX transactions, broker agreements with
brokers selected by such officer, having such terms and conditions as such
officer may deem necessary or advisable, subject to the approval of the form
thereof by the Executive Vice President, Secretary and General Counsel or his
designee, including provisions relating to collateral or margin payments under
such agreements, provided that the release of monies from the Operating Fund for
such collateral or margin payments under such provisions be governed by the same
requirements and restrictions set forth in the April 27, 2004 Resolution;

which may: (i) exceed the fuel and electric per-transaction limits for
financial hedge transactions, and (ii) the spot-trade limits for physical
transactions, established in Appendices A and B of the January 25, 2005
Resolution, provided, however, that, in addition to any other cumulative or
per-day limits in Appendices A and B, the aggregate nominal value of all such
transactions outstanding at any one time shall not exceed $195 million, with the
term “nominal value” meaning, for the purposes of this limitation, as applied to
a particular transaction: (1) the aggregate amount to be paid by the Authority,
or estimated to be paid by the Authority, pursuant to the transaction as
determined as of the date of entry into the transaction by the Vice President –
Energy Resource Management; (2) in the case of a NYMEX contract, the value of
the contract based upon the price per dekatherm of the contract on the date of
execution of the contract, and (3) in the case of conditional contracts (e.g.,
options to buy fuel), the value of the contract under the assumption that the
conditions have been fulfilled and the contract were going forward; and be it
further

RESOLVED, That the Vice President – Energy Resource Management is hereby
authorized to execute agreements and to authorize his designees to execute
agreements to effectuate transactions approved by the Vice President – Energy
Resource Management pursuant to the foregoing Resolution, including ISDA Master
Agreements and schedules and confirmations relating to such new or existing
Master Agreements, having such terms and conditions as the Vice President –
Energy Resource Management deems necessary or advisable, subject to the approval
of the form of such agreements by the Executive Vice President, Secretary and
General Counsel or his designee; and be it further

RESOLVED, That the Chairman, the President and Chief Executive Officer, and
all other officers of the Authority, and each of them hereby is, authorized on
behalf of the Authority to do any and all things and take any and all actions
and execute and deliver any and all certificates, documents, and agreements to
effectuate the foregoing resolutions, subject to the approval of the form
thereof by the Executive Vice President, Secretary and General Counsel or his
designee.

The President and Chief Executive Officer
submitted the following report:

SUMMARY

“The Trustees are requested to
authorize the execution of an agreement with the New York City Housing Authority
(‘NYCHA’) concerning NYCHA’s prepayment of $25 million into an escrow fund
(‘Escrow Fund’) established under an escrow agreement (‘Escrow Agreement’), to
be used for the implementation, by the Authority, of certain energy services
projects (‘Projects’) at NYCHA housing developments. The Authority would draw on
the monies in the Escrow Fund to pay for the costs of the Projects. The
Projects would be implemented under the Authority’s standard Cost Recovery
Agreement (‘CRA’). The special terms of the prepayment arrangement and a
description of the Projects to be performed would be set forth in a Rider to
such CRA, which Rider would constitute a supplement to the CRA. The Trustees
are requested to authorize the execution of such Rider and any subsequent
amendments to the Rider to cover additional future NYCHA projects to be
implemented on a similar prepaid basis.

“The Trustees are also requested
to authorize the execution of an escrow agreement among the Authority, NYCHA and
a third party bank, which would establish the Escrow Fund.

BACKGROUND

“At their meeting of February 28, 1995, the
Trustees approved funds in the amount of $40 million to implement a demand-side
management program to promote the use of energy-efficient equipment for the
Southeastern New York (‘SENY’) public housing customers as part of a long-term
agreement for the sale of electricity. The primary focus of the program was the
purchase and installation of super-efficient refrigerators for NYCHA, the
largest housing authority in the country. NYCHA is responsible for more than
180,000 apartments in 2,700 master-metered buildings located throughout the five
boroughs of New York City. An additional $35 million in funding was added to
the program during the period 2000-04. This initiative has now been completed
at a total installed cost of approximately $70 million. Approximately 185,000
refrigerators were installed, resulting in more than $7 million in energy
savings for the customer and a decrease in greenhouse gases of 76,000 tons
annually.

“Earlier this year, NYCHA and the
Authority staff met to discuss next-phase energy efficiency projects. NYCHA
identified a need to replace existing domestic hot water storage tanks in its
buildings. In view of the success of the energy-efficient refrigerator
initiative, NYCHA determined that the Authority would be its best option to
implement a turnkey hot water heater Project. (Authority resources previously
assigned to the Refrigerator Program can be made available to implement this
Project.) Accordingly, NYCHA asked the Authority to undertake additional energy
services work: replacement of existing domestic hot water storage tanks with
instantaneous steam domestic hot water heaters in 500 NYCHA buildings (the
‘Initial Project’). The total cost of installation for each of these 500 units
is about $50,000, for a total Project cost of $25 million. A preliminary review
of these units indicates that the average annual energy savings will be about
$5,000 to $7,000 per unit, resulting in a 7- to 10-year payback. The Initial
Project is to be completed by the end of 2006.

DISCUSSION

“On March 24, 2005, NYCHA and the Authority
executed supplemental terms and conditions governing the supply of electricity
to NYCHA (the ‘LTA’). The LTA envisioned, in subsection A of Article IX, that
the Authority and NYCHA will “continue to work in partnership to identify energy
efficiency and clean technology projects at the Customer’s facilities and to
implement such projects that are economically feasible and agreeable to the
Authority and the Customer.” Furthermore, the LTA specified that the energy
efficiency and clean technology projects would be implemented in the context of
a cost-recovery agreement.

“Staff is requesting the Trustees
to approve the execution of the Rider covering the Initial Project and also to
authorize any subsequent amendments to the Rider that would cover additional
energy services projects (the ‘Additional Projects’) at NYCHA to be implemented
under the CRA. Such authorization would cover additional projects done on a
prepaid basis similar to that governing the Initial Project.

“In addition, staff is also requesting the
Trustees to authorize the entry by the Authority into the Escrow Agreement among
the Authority, NYCHA and a third party bank for the deposit of the prepayment of
funds for the Initial Project and for the Additional Projects, if any. NYCHA is
expected to deposit $25 million into the Escrow Fund on or before June 30, 2005
to cover the Initial Project. Under the terms of the Escrow Agreement, these
funds, once deposited, could be withdrawn only by the Authority to finance
Initial Project costs. A similar restriction would govern deposits made for the
Additional Projects. The Trustees are also requested to authorize successor
escrow agreements, should they become necessary.

“If, in the future, NYCHA
requests to add additional monies to the Escrow Fund to cover the Additional
Projects, such Additional Projects would be covered by amendments to the Rider.

“By working with NYCHA under this
prepayment arrangement, the Authority is helping NYCHA begin replacing the
existing domestic hot water storage tanks with highly efficient instantaneous
steam domestic hot water heaters in an expeditious manner. The Authority will
be helping its customer, NYCHA, which is currently experiencing many operational
problems with its existing domestic hot water storage tanks. These units, which
provide residents with hot water in their apartments, were installed as early as
the 1930s. Since these units were installed in multiple buildings during the
same time period, NYCHA is experiencing multiple simultaneous failures.

“Therefore, time is of the
essence for these Projects to be implemented and for these units to be
replaced. This large-scale replacement at 500 NYCHA buildings will require the
Authority to implement a fast-track program to avoid multiple simultaneous
failures and to avoid the loss of hot water availability to the residents. The
replacement of these units will provide energy savings, as well as operational
and maintenance savings.

“If the Trustees authorize the
execution of the agreement with NYCHA, the Rider would not become effective, and
the Escrow Fund would not be established, unless the Authority receives
confirmation from the U. S. Department of Housing and Urban Development (‘HUD’)
that the Rider and the proposed funding comply with applicable HUD regulations
and requirements. Counsel’s office will review HUD’s confirmation to assure that
this condition has been met.

FISCAL INFORMATION

“The Initial Project and any
Additional Projects implemented under the Rider and amendments to the Rider will
be financed with prepayment funds provided by NYCHA. Any commitments made by
the Authority for the Initial Project and any Additional Projects would not
exceed monies deposited in the Escrow Fund. All Authority costs, including
Authority overheads, will be recovered consistent with other Energy Services and
Technology programs. Any fees related to the Escrow Account will be paid from
monies in the Escrow Fund and will not be the Authority’s responsibility.

RECOMMENDATION

“The Senior Vice President – Energy
Services and Technology and the Director – Energy Services recommend that the
Trustees authorize the Senior Vice President – Energy Services and Technology to
enter into the Rider, as described above, and for the Treasurer to enter into
the Escrow Agreement and any successor escrow agreement, as described above, and
to authorize the Senior Vice President – Energy Services and Technology to enter
into amendments to the Rider to cover the Additional Projects, as described
above, provided that all such Additional Projects be done on a prepaid basis
similar to that governing the Initial Project.

“The Executive Vice President – Power
Generation, the Executive Vice President, Secretary and General Counsel, the
Senior Vice President – Marketing, Economic Development and Supply Planning, the
Senior Vice President – Public and Governmental Affairs, the Senior Vice
President and Chief Financial Officer, the Vice President – Procurement and Real
Estate and I concur in the recommendation.”

The following resolution, as recommended by
the President and Chief Executive Officer, was unanimously adopted.

WHEREAS, the Authority has a long-term energy supply agreement with the New
York City Housing Authority (“NYCHA”) under which the Authority agreed, among
other things, to work in partnership with NYCHA to identify energy efficiency
and clean technology projects and to implement such projects as are economically
feasible and agreeable to both parties; and

WHEREAS, NYCHA has requested that the Authority work with it on a prepayment
arrangement basis; and

WHEREAS, the Authority has determined that it will assist NYCHA, and that the
prepayment arrangement would be advantageous to the Authority in that it would
assure the Authority of payment for project work performed;

NOW THEREFORE BE IT RESOLVED, That the Trustees authorize the Senior Vice
President – Energy Services and Technology to: (1) enter into a Rider with NYCHA,
on behalf of the Authority, as described in the foregoing report of the
President and Chief Executive Officer, having such terms and conditions as the
Senior Vice President – Energy Services and Technology deems necessary or
advisable, subject to the approval of the form thereof by the Executive Vice
President, Secretary and General Counsel, applicable to the Initial Project, as
described in the foregoing report of the President and Chief Executive Officer,
provided that such Rider incorporate the prepayment mechanism described in the
foregoing report of the President and Chief Executive Officer, and (2) enter
into any amendment to the Rider applicable to the Additional Projects, as
described in the foregoing report of the President and Chief Executive Officer,
having such terms and conditions as the Senior Vice President – Energy Services
and Technology deems necessary or advisable, subject to the approval of the form
thereof by the Executive Vice President, Secretary and General Counsel, and
provided that such amendment incorporate the prepayment mechanism described in
the foregoing report of the President and Chief Executive Officer; and be it
further

RESOLVED, That the Trustees authorize the Treasurer to enter into an escrow
agreement among the Authority, NYCHA, and a third party bank, or any successor
escrow agreement with any replacement bank chosen by agreement between the
Authority and NYCHA, with such escrow agreement or successor escrow agreement
having such terms and conditions as the Treasurer deems necessary or advisable
to establish the Escrow Fund, as described in the foregoing report of the
President and Chief Executive Officer, to cover the funding of the Initial
Project and the Additional Projects; and be it further

RESOLVED, That the Chairman, the President and Chief
Executive Officer and all other officers of the Authority are, and each of them
hereby is, authorized on behalf of the Authority to do any and all things and
take any and all actions and execute and deliver any and all agreements,
certificates and other documents to effectuate the foregoing resolution, subject
to the approval of the form thereof by the Executive Vice President, Secretary
and General Counsel.

The President and Chief Executive
Officer submitted the following report:

SUMMARY

“The Trustees are requested to
approve an extension of Contract FD-13 to the United States Department of Energy
(‘DOE’) for use by Brookhaven National Laboratory (‘Brookhaven’) for a period of
three years.

BACKGROUND

“The Authority has been serving Brookhaven
since November 1982 and has steadily increased the amount of electricity
allocated to the current level of 60 MW. According to Brookhaven, these
valuable electricity resources have saved the laboratory in excess of $188
million over the life of the contract, while at the same time giving it the
ability to attract new, cutting-edge science projects to Long Island. These
projects include the Alternate Gradient Synchrotron, the National Synchrotron
Light Source and Relativistic Heavy Ion Collider (‘RHIC’), with the potential of
attracting a “next-generation” light-source facility, The Synchrotron Light
Source II, in the near future. Brookhaven, a major employer on Long Island that
attracts members of the scientific community from New York State, across the
country and around the world, has more than 3,500 employees and a $450 million
annual budget.

DISCUSSION

“Brookhaven is requesting an
extension of the existing FD-13 for a three-year period commencing at the
expiration of the current contract on June 30, 2005. The extended term would run
until June 30, 2008. The contract extension will provide for a flow-through of
market prices for all of Brookhaven’s electricity requirements. The Authority
will continue to offer Brookhaven the economic benefits associated with certain
“grandfathered” transmission rights and other measures agreed to in separate
Memoranda of Understanding concerning the control of Brookhaven’s summer peak.
Additionally, the Authority, the Long Island Power Authority, the Empire State
Development Corporation and New York State Senator LaValle will provide
financial incentives to further reduce the effective rate of electricity to
Brookhaven. The Authority’s financial incentive is $1.3 million per year for
the term of the extension, which will be offset through the sale of low-cost
power at market rates.

“New York State’s goal is to
offer an effective electricity price for Brookhaven that is substantially lower
than the full market price for electricity on Long Island and to allow
Brookhaven to compete within the National Lab System for world-class science.
It is estimated that the measures outlined above could allow Brookhaven to move
forward with its scientific endeavors.

FISCAL INFORMATION

“Extension of the Brookhaven contract for
three years on the terms outlined above will be revenue-neutral to the Authority
since Brookhaven will pay the cost of market power provided by the Authority at
market rates.

RECOMMENDATION

“The Manager – Business Marketing and
Economic Development recommends that Brookhaven National Laboratory’s contract
be extended as described herein and that the terms of service for the sale of
power to Brookhaven be modified in accordance with the foregoing.

“The Executive Vice President,
Secretary and General Counsel, the Senior Vice President – Marketing, Economic
Development and Supply Planning, the Vice President – Major Accounts – Marketing
and Economic Development and I concur in the recommendations.”

Mr. Yates
presented the highlights of staff’s recommendations to the Trustees. In response
to Vice Chairman McCullough’s request for clarification about the sentence in
the item regarding the $1.3 million financial incentive to be offset through the
sale of low-cost power at market rates, it was noted that the dollar value of
the incentive equaled the estimated annual value of the sale of 5 MW of
hydropower at market prices. Mr. Yates added that even with the contract
extension, Brookhaven will experience an increase in electricity price because
of an increase in market prices. However, in response to a question from
Trustee Seymour, Mr. Yates explained that the Authority would recover all of its
costs of service under the contract. President Zeltmann said the extension of
this contract had resulted from an enormous amount of effort and innovation on
the part of Authority staff. Chairman Ciminelli congratulated and thanked staff
for a job well done.

The following resolution, as
recommended by the President and Chief Executive Officer, was unanimously
adopted

RESOLVED, That the extension of contract FD-13 for a
three-year period be approved on the terms set forth in the foregoing report of
the President and Chief Executive Officer; and be it further

RESOLVED, That the Senior Vice President – Marketing,
Economic Development and Supply Planning or her designee be, and she hereby is,
authorized to execute any and all documents necessary or desirable to effect the
foregoing, subject to the approval of the form thereof by the Executive Vice
President, Secretary and General Counsel.

RESOLVED, That the Chairman, the President and Chief
Executive Officer and all other officers of the Authority are, and each of them
hereby is, authorized on behalf of the Authority to do any and all things and
take any and all actions and execute and deliver any and all certificates,
agreements, and other documents to effectuate the foregoing resolution, subject
to the approval of the form thereof by the Executive Vice President, Secretary
and General Counsel.

The President and Chief Executive Officer
submitted the following report:

SUMMARY

“The Trustees are requested to
authorize an increase in the contract amount of the Authority’s Agreement with
International Fuel Cells, LLC (‘UTC Fuel Cells’) for the furnishing, delivering
and commissioning of fuel cell power plants at various customer sites under
Contract No. 4500048810. The increase in the contract amount will allow the
Authority to procure a 200 kW fuel cell for installation at the Bronx Zoo in New
York City. Such installation will be implemented pursuant to the Authority's
Distributed Generation Program.

BACKGROUND

“Section 2879 of the Public
Authorities Law and the Authority's Guidelines for Procurement Contracts require
Trustees' approval for procurement contracts involving services to be rendered
for a period in excess of one year.

“In accordance with the
Authority's Expenditure Authorization Procedures, the award of non-personal
services or equipment purchase contracts in excess of $3,000,000, as well as
personal services contracts in excess of $1,000,000 if low bidder, or $500,000
if sole source or non-low bidder, require Trustees' approval.

“In November 2001, the Authority
signed an agreement (‘Agreement’) with UTC Fuel Cells for the furnishing,
delivering and commissioning of eight 200 kW fuel cell power plants. Such
agreement was authorized by the Trustees at their meeting of April 17, 2001.
Under the Agreement, two fuel cells were installed at the Red Hook Waste Water
Treatment Facility (‘WWTF’), two at the 26th Ward WWTF, three at the
Hunts Point WWTF and one at the Oakwood Beach WWTF. All eight fuel cells were
installed in 2003 and are currently operating. To date, $7,610,000 has been
spent under that original agreement.

“Change Order No. 1 to the
Agreement was issued in May 2003, extending the end date of the Agreement from
December 31, 2002 to December 31, 2003, and including the option for the
Authority to purchase additional fuel cell power plants prior to December 31,
2003. On March 15, 2004, the Authority issued Change Order No. 2, extending the
term of the Agreement to December 31, 2005, and providing the Authority with the
option of purchasing additional fuel cell power plants on or before December 31,
2005. Change Order No. 3 was issued on April 28, 2004 in the amount of $35,800
for the replacement of the integrated low shift converter (‘ILS’) on Unit 9274
at the Red Hook WWTF. On October 5, 2004, the President and Chief Executive
Officer approved Change Order No. 4 in the amount of $2,900,000 for the purchase
of four additional fuel cells to be installed as follows: one at the New York
City Transit Corona Maintenance Yard, one at the Suffolk State Office Building
and two at Grand Central Terminal.

“Authority staff recommends that
the Authority exercise its option to purchase an additional 200 kW fuel cell for
the amount of $725,000, as provided in Change Order No. 2. The fuel cell would
be installed at the Bronx Zoo. A New York State Energy Research Development
Authority (‘NYSERDA’) grant for the Bronx Zoo Fuel Cell Project in the amount of
$584,000 was awarded to support costs associated with fuel cell procurement and
installation. A U.S. Department of Defense (‘DOD’) grant for the Bronx Zoo Fuel
Cell Project in the amount of $200,000 was also awarded to this project to
support costs associated with the procurement of the fuel cell. Under the terms
of the DOD grant, the Authority is required to issue a purchase order for the
fuel cell by June 1, 2005. Authorization to execute Change Order No. 5 is
requested in the additional amount of $725,000. This will bring the total value
of the contract to $11,580,000, and the total value of cumulative change orders
under this contract to more than $3,000,000. Under the Authority's Expenditure
Guidelines, all equipment contracts with cumulative change orders exceeding
$3,000,000 require Trustees' approval.

DISCUSSION

“The Wildlife Conservation
Society (‘WCS’) operates all New York City zoos and aquariums under contract
with the New York City Department of Citywide Administrative Services (‘DCAS’).
DCAS and the Authority have undertaken numerous distributed generation projects
at New York City sites during the last several years, including the installation
of a fuel cell at the New York City Aquarium in 2001. Presently, DCAS, WCS and
the Authority have identified the need for a distributed generation system to
provide both heat and power to the Lion House currently being renovated at the
Bronx Zoo.

“The Bronx Zoo operates an aging
5 MW cogeneration facility for both heat and power. The cogeneration facility
is operated at peak capacity for much of the year and does not allow for planned
facility expansion efforts at the Zoo. As part of its major renovation of the
Lion House, the Bronx Zoo has requested assistance from the Authority in meeting
the expected increase in electric and thermal loads. A further requirement of
this project is that the new electrical capacity be delivered with minimal air
emissions and noise in consideration of the close proximity of the animals at
the Zoo. The Bronx Zoo and the Authority determined that a 200 kW fuel cell
would provide sufficient electric and thermal capacity for the Lion House while
meeting its environmental requirements.

“The Bronx Zoo design team has
prepared construction documents for the Lion House renovation project that
include installation of a 200kW fuel cell. In addition, the Bronx Zoo
construction contractor will complete most of the electrical and mechanical
installation work required for the final placement of the fuel cell in the Lion
House. The Authority will be responsible for procuring the fuel cell, delivery
and final connections at the Lion House. The Authority will implement this work
under a cost-recovery agreement, ensuring that all of its costs associated with
its work effort are recovered.

ENVIRONMENTAL BENEFITS

“Fuel cells in a combined
heat-and-power application have operating efficiencies of close to 70%.
Operation of these fuel cells is estimated to result in a regulated emissions
reduction of 20.7 tons per year and in a reduction of CO2 emissions
of more than 1,200 tons per year. Use of the thermal energy from the fuel cell
will also offset the Zoo’s use of natural gas for heating and cooling
purposes.

FISCAL INFORMATION

“Under the Authority's
Expenditure Guidelines, all equipment contracts with cumulative change orders
exceeding $3,000,000 require Trustees' approval. Funding for the Bronx Zoo fuel
cell will be from commercial paper debt financing or from Operating Fund
monies. The project may also receive a small amount of Petroleum Overcharge
Restitution (‘POCR’) funds. The total cost to the Authority of $725,000 will
cover fuel cell procurement.

“Authority staff has secured a
$200,000 co-funding commitment from DOD for this project. Authority staff also
secured a co-funding commitment to support the procurement and installation of
the fuel cell from NYSERDA in the amount of $584,000.

RECOMMENDATION

“The Senior Vice President –
Energy Services and Technology, the Senior Vice President – Public and
Governmental Affairs and the Director - Research and Technology Development
recommend that the Trustees authorize an increase in contract amount for the
Authority’s Agreement with International Fuel Cells, LLC as described above.

“The Executive Vice President –
Power Generation, the Executive Vice President, Secretary and General Counsel,
the Senior Vice President - Marketing, Economic Development and Supply Planning,
the Senior Vice President - Chief Financial Officer and I concur in the
recommendation.”

Mr.
Zelingher presented the highlights of staff’s recommendations to the Trustees.
Trustee Carey said staff was doing a good job in recovering all costs associated
with this project. In response to a question from Vice Chairman McCullough, Mr.
Esposito said the costs would be recovered over a period of 10 to 12 years.

The following resolution, as
recommended by the President and Chief Executive Officer, was unanimously
adopted.

RESOLVED, That the Trustees hereby authorize an increase in the contract
amount for the Authority’s Agreement with International Fuel Cells, LLC as set
forth in the foregoing report of the President and Chief Executive Officer, and
that capital expenditures are hereby approved to be committed in accordance with
the Authority’s Expenditure Authorization Procedures for such projects in the
amount and for the purpose listed below:

Expenditure

Capital
Authorization

Bronx Zoo fuel cell procurement

TOTAL PROJECT COST $725,000

AND BE IT FURTHER RESOLVED, That the Authority’s Commercial Paper Notes,
Series 3, and Operating Fund monies may be used to fund project costs, as well
as Petroleum Overcharge Restitution funds in an amount to be determined by the
Senior Vice President - Energy Services and Technology; and be it further

RESOLVED, That the Chairman, the President and Chief
Executive Officer and all other officers of the Authority are, and each of them
hereby is, authorized on behalf of the Authority to do any and all things and
take any and all actions and execute and deliver any and all certificates,
agreements and other documents to effectuate the foregoing resolutions, subject
to the approval of the form thereof by the Executive Vice President, Secretary
and General Counsel.

WHEREAS,
John L. (Jack) Murphy served with dedication and distinction as a member of the
New York Power Authority’s Public Affairs Department staff for more than 18
years, including more than a decade as Director of Public Relations and head of
the Department’s Media Relations Division; and

WHEREAS,
Mr. Murphy’s career at the Authority was marked by a series of promotions to
positions of increasing responsibility and by a singular blend of talent,
professionalism and integrity that earned him the respect of his colleagues and
of journalists throughout the State; and

WHEREAS,
to his duties as the Authority’s spokesperson on a broad range of critical
matters, Mr. Murphy brought an acute awareness of the issues and an uncommon
ability to frame them in graceful and understandable terms; and

WHEREAS,
before joining the Authority staff, Mr. Murphy had worked as a reporter and
editor for 22 years, a period that included 12 years as editor of The Evening
Star of Peekskill and service as president of the New York State Society of
Newspaper Editors; and

WHEREAS,
this phase of his career brought him a redoubtable roster of personal contacts
and a keen insight into the workings of the journalism profession that served
him well in his duties at the Authority; and

WHEREAS,
beginning with his days as a quintessential local editor, Mr. Murphy has devoted
his time and talents to numerous civic activities in Peekskill, profoundly
benefiting his fellow citizens and bringing credit to the Authority in that
important community; and

WHEREAS,
Jack Murphy has retired from the Power Authority, leaving a legacy of
accomplishment and of commitment to the highest professional standards;

NOW
THEREFORE BE IT RESOLVED, That the Trustees of the Power Authority of the State
of New York wish Mr. Murphy a happy, healthy and fulfilling retirement and that
they express their deepest appreciation to him for his many contributions to the
Power Authority and to the people of New York State.

The next meeting of the
Trustees will be held on Tuesday, June 28, 2005, at 11:00 a.m.,at the
Clarence D. Rappleyea Building in White Plains, unless otherwise designated
by the Chairman with the concurrence of the Trustees.